The real estate market is changing rapidly. It's a great time to buy. Prices are low, interest rates are low, inventory is higher than ever and sellers are willing to negotiate fantastic concessions. The only problem is the tightening of credit requirements. The current credit score needed to qualify for 95% LTV mortgage financing is 680. (at the time of this writing)
Many consumers who have struggled and saved planning to buy their first home now are faced with the task of credit repair. I talk to many individuals who have shelved out hundreds of dollars to credit repair companies in hopes of removing bad debt and building credit scores. So, I decided to write this article in attempt to help those that want to improve credit. I hope it's a benefit to all that read.
This is going to be a very short article I promise. The trick to building good credit is simple, "PAY YOUR BILLS." (Just kiddin....that's an old bill collector joke...lol) Anyway, let's continue...,
The problem with paying off old debt is knowing which bills to pay. Many individuals believe that paying off old bad debt will cause credit scores to improve. I'm saying from years of experience that this is incorrect. Some individuals even pay hundreds of dollars to so-called credit repair companies in hopes of removing old bad credit only to have their credit destroyed. These companies collect huge fees then negotiate low pay-offs. Many debt management companies collect lump sum payments then pay creditors at a slower pace than the consumer further destroying one's credit. They write tons of letters to creditors claiming that information on the credit report is incorrect only to have the same bad credit re-appear down the road at the worst possible time. To use an analogy......it's like stirring murky muddy waters hoping that the mud will somehow go away. Actually, I don't think it's legal to charge for credit repair in advance in the great state of Texas.
If you pay on or negotiate with non-secured bad debt that's older than 2 years old it will only have an adverse affect on your credit. What actually happens when you pay on old bad credit..... old bad credit becomes new bad credit driving down your credit scores.
You can cheat the credit system with the following three step formula.
1. Obtain a credit report which contains scores.
2. Identify which debts must be addressed or have a professional credit analysis.
3. Put new good credit on your report.
Obtain 3 secured or no credit needed credit cards. These cards usually range from $250.00 to $750.00 amounts of allowable credit and are easily obtained right off the internet. Once you have these cards, keep the balances under 50%. Pay on them well before the due dates and ALWAYS PAY A FEW DOLLARS EXTRA. I guarantee that your credit scores will increase drastically over a 6 month period.
I've personally used this technique to increase the credit scores of many clients. I recently watched a client's score increase more than 150 points using this technique. He implemented this simple system and within 6 months he was able to purchase a new home.
Here's a good place to obtain secured credit cards.